One of the most significant factors home buyers and sellers focus on when buying real estate is the negotiated sales price in the purchase contract. While the sales price is undeniably important, the reality is that other terms in the sales contract may have more far-reaching and significant effects on the transaction.
In fact, with a closer look at some of the most important terms, you
will see why you and your agent should actively negotiate for improved
terms rather than a lower sales price.
Some buyers and sellers will haggle over a few thousand dollars in
the sales price without paying
attention to the closing costs, but the
fact is that the closing costs for a typical transaction may cost the
buyer between two to five percent of the sales price on average.
A sales contract may be negotiated so that the seller assumes some or
most of the closing costs, and this can result in considerable savings
the buyer. Likewise, when a contract is negotiated in the interest of
the seller, the seller may save thousands of dollars at closing if the
contract states that the buyer is responsible for these costs.
The Appraised Value
In an ideal world, a home would appraise for the contracted sales
price, but this is not always the case. A sales contract may be written
with terms that allow for the sales price to be renegotiated after the
appraised value is confirmed, and this may benefit both parties. Some
sales contracts, however, state that the negotiated sales price is final
regardless of the appraised value.
The Property Inspection
Many home buyers opt to obtain a property inspection to determine if
there are hidden issues with the property structure, foundation, roof,
air quality and other components. Some inspections reveal that a home is
in fairly good condition, but others may reveal that a property needs
thousands or even tens of thousands of dollars’ worth of repairs.
Some sales contracts may be written so that the buyer may back out of
a contract within a certain period of time after receiving the property
inspection report or so that the terms of the sales contract may be
renegotiated once the property inspection report has been completed.
A real estate transaction may extend for several weeks or even months
while the buyer contracts with a lender, an appraiser, a property
inspector and other third parties. During this period of time, many
events can occur that may adjust the interest level or even the ability
of the buyer and seller to fulfill the contract.
Some sales contracts are written so that the buyer may opt out of the
contract within a certain period of time with minimal expense and
regardless of other factors related to the appraisal and inspection.
Generally, there are standard terms found in many real estate sales
contracts, but these terms can be adjusted by either party to benefit
buyers or sellers. Those who are preparing to buy or sell property
should actively communicate their needs and desires with their real
estate agent so that the contract may be negotiated with terms most
favorable to their needs.